Learning how to budget and manage money effectively is a crucial step experts say college students should learn to reach their financial, academic and personal goals.
Albert Okunade, professor of economics at the University of Memphis, said personal maturity and responsibility are important factors in budgeting and management of time and finances, and he said these traits are necessary to achieve sustainable academic success and on-time graduation.
"Too many college students in the United States campuses each year are inadequately prepared to align their available limited personal resources (time, money) with expenditures (money, time use)," Okunade said.
A budget can be broken down into a simple equation: earnings (income) minus spending (expenses), according to the national Office of Federal Student Aid (FSA). Budgeting allows students to build decision-making skills and reach both financial and academic goals while avoiding debt and improving credit. Budgeting can keep a student's finances under control, show the student where spending adjustments are needed and help the student decide exactly where the money will go.
The FSA listed one of the first steps in creating a budget is to write down short-term goals and consider needs, wants and priorities. Short-term goals for a college student may include purchasing textbooks, going out with friends or paying an upcoming cell phone bill. Next, medium-term goals involve planning one to three years into the future. These goals might include purchasing a new electronic, saving a specific amount into an emergency fund or saving for a down payment on a new vehicle. Long-term goals for after graduation might include paying off student loan debt or saving for a down payment on a house.
Okunade said students should know and understand their financial resources and prepare a spreadsheet to guide management of these resources. Okunade also encouraged students to resist securing too many credit cards.
"Tap into various resources within the university," Okunade said. "Better still, take a personal finance course."
RayShauna Davis, a U of M budget analyst, said students should get accustomed to saving, budgeting and planning.
"If you receive a refund, try to save at least 75 percent of it unless there is an emergency,” Davis said. “Allow yourself a budget of $30 to 40 a week if you can."
Davis said students should plan for semester expenditures like books, supplies and other costs ahead of time, so they can have an estimate of how much money will be required. Davis suggested students track their spending over time and update a budget as needed.
"Always, always, always plan for things ahead of time," Davis said.
